When does aggregation reduce risk aversion?

Christopher Chambers and Federico Echenique

Games and Economic Behavior, 2012, vol. 76, issue 2, 582-595

Abstract: We study the problem of risk sharing within a household or syndicate. A household shares risky prospects using a social welfare functional. We characterize the social welfare functionals such that the household is collectively less risk averse than each member, and satisfies the Pareto principle and an invariance axiom. We single out the sum of certainty equivalents as the unique member of this family which is quasiconcave over riskless allocations.

Keywords: Certainty equivalent; Aggregation; Risk aversion; Sum of individual certainty equivalents (search for similar items in EconPapers)
JEL-codes: D11 D6 D71 D81 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:76:y:2012:i:2:p:582-595

DOI: 10.1016/j.geb.2012.07.015

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